Monday, December 5, 2011

Lack of Diversity Plagues Portfolio

This post won't be a long one but it will address a problem with my investments.

My portfolio allocation takes in Canadian, American and international investments, and yet it is plagued by a lack of diversity. Why? Because my goal of enjoying high dividends forces my portfolio to gravitate to the energy sector plus the financials, utilities and real estate sectors.

Personally, this doesn't worry me all that much but still it is a concern.

Of the four sectors mentioned, I am least exposed to utilities. For that reason, I figure I can afford to put my available cash into something like the BMO Equal Weighted Utilities Index (ZUT) or possible the top utilities investments themselves. You see, there are some companies in ZUT that buoy the yield but add to the risk.

How To Invest Online reports that EMA, FTS and CU survived the 2008 crash with much less of a price decline than the TSX Composite. If it's stability one seeks, maybe these are the utility stocks to own. CU doesn't yield enough to be included in my portfolio. The Fortis yield is a little low, but it is still worthy of consideration since my portfolio is yielding almost seven percent at the moment when calculated on its opening balance at retirement.

Emera (EMA) has a yield of 4.1% and closed today at $32.70
Fortis (FTS) has a yield of 3.6% and closed today at $32.58.

A plus for Fortis is that it is again included in the Scotia McLeod Income Plus Guided Portfolio. In the spring, Emera pushed Fortis to the sidelines but that was then and this is now. Today it is Emera that is warming the bench.

I have placed both Emera and Fortis on my watch list.

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